Howard Marks: Finding Bargains In The ‘Uninvestable’

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During his recent interview with The Motley Fool, Howard Marks discussed which areas will benefit from the ‘New World Order’, and finding bargains in the ‘Uninvestable’. Here’s an excerpt from the interview:

Marks: Well, it’s basically everything on the lending side of the equation. That’s one, so ranging from cash which now has a few percent positive return through treasuries, through high grades, through high yield.

Private lending now yields low double digits, it used to be mid to high single digits, distressed debt funds should be able to make more money in a more target-rich environment, and then there’s the one off here and there.

If you want to look at the things that have been hurt, an example is the emerging markets. The emerging markets face significant challenges.

They’ve incurred a lot of debt denominated in dollars, and they don’t have that much access to dollars, but this low-return world, the hunt for return on investors part, allowed, made dollar capital available to the emerging markets through loans, which has not normally been the case. They’ll struggle with paying off those loans.

But the securities are starting from a cheap place. Is it cheap enough, then they’re going to go up? I’m not saying that, but there are two piles of securities or assets. There’s one pile that everybody knows about, feels they understand, feels good about, feels are seemly and prudent and they’re optimistic about.

Then there’s another pile of things that people don’t know about, don’t understand, don’t feel good about, think are unseemly, and they’re pessimistic about. Which pile contains the bargains? It’s the latter.

Now, I want to say very clearly for your viewers and listeners, that’s not to say that everything on the latter pile is a bargain, but the bargains are in that pile. I’ve made a living for 50-odd years buying things on that pile, doing the things other people didn’t want to do. You get to China. What’s the word that people have been applying to China for the last year or so? Uninvestable.

You can listen to the entire interview here:

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